Source: iStock
1. The busiest week of the summer on Wall Street is about to arrive.
More than 150 $S&P 500(.SPX)$ companies, including $Microsoft(MSFT)$ , $Alphabet(GOOGL)$ , and $Meta Platforms, Inc.(META)$ , will release quarterly reports this week. In addition, the the Federal Reserve is expected to announce another interest rate rise by a quarter of a percentage point.
The financial reports of $Netflix(NFLX)$ and $Tesla Motors(TSLA)$ last week prompted investors to sell off these two technology stocks that rose sharply this year, thus dragging down the $NASDAQ(.IXIC)$ by 0.6% last week. Whether this model will be played again will be the main theme of the market this week.
2. The end of the Federal Reserve's interest rate hike?
The Federal Reserve will announce its latest monetary policy decision at 2pm Eastern Time on Wednesday, with Federal Reserve Chairman Powell holding a press conference in half an hour. According to the data of Chicago Mercantile Exchange last Friday, the probability of the Federal Reserve raising the target range of the Federal funds rate by 0.25% again to the highest 5.25% -5.5% since 2001 is 99.8%.
Michael Gapen, an economist at Bank of America, said that based on the fact that the US economy was only slowly cooling down, they expected the Federal Reserve to raise the target range of the Federal funds rate by 25 basis points to 5.25-5.50%. Also, they believed that most committee members believed that it was necessary to further rebalance supply and demand to ensure that the downward trend of inflation continued.
Whether it is necessary to raise interest rates again later this year will be the most concerning topic for investors this summer, so Powell's speech will be the focus.
Ellen Zentner, Chief US Economist at Morgan Stanley, stated that the committee needs to see some sort of sings to to confidently adopt a policy of maintaining interest rates for the long term. Powell may provide a clearer explanation for this, which is also the information they want to find from the press conference. For example, Federal Reserve Governor Waller previously stated that if the next two data on core inflation rates "appear to be the last two," they would indicate a possible cessation of interest rate hikes. If Powell also releases similar information, it will indicate that the time to maintain interest rate levels unchanged for the long term is approaching.
3. A wave of financial reports has arrived
$Microsoft(MSFT)$ and $Alphabet(GOOG)$ will release their financial reports after Tuesday, while the reports on Wednesday will focus on $Meta Platforms, Inc.(META)$ and $Chipotle Mexican Grill(CMG)$ . In addition, $Verizon(VZ)$ and $AT&T Inc(T)$ , which will release financial reports on Tuesday and Wednesday respectively, will also be the focus of the market. In early July, the Wall Street Journal's report on lead-containing cables caused the stock prices of these two telecommunications giants to plummet.
In addition, how long can the popularity of artificial intelligence (AI) continue? The financial reports of large technology companies should provide us with more information. For example, Apple (NASDAQ: AAPL) announced that it may build its own ChatGPT, then its stock price rose nearly 1%. And after Microsoft announced a monthly fee of $30 for the AI version of Microsoft 365, its stock price also rose.
Paul Meeks, portfolio manager at Independent Solutions Wealth Management, said that if the AI craze of the previous quarter was just news hype, the market needs to see more tangible content and a real boost to the company's profits this quarter.
Last but not least, this week's financial reports of $McDonald's(MCD)$ , $Domino's Pizza(DPZ)$ and $Chipotle Mexican Grill(CMG)$ will reveal more information about consumption in the economy. Last week's financial reports from major banks and airlines showed that consumers still have a willingness to consume, which is a positive signal for not only these companies but also the entire US economy.
Nevertheless, the phenomenon of profits declining still exists.
Among 18% listed companies in the $S&P 500(.SPX)$ index that have released financial reports, 75% of them report higher than expected earnings per share, which is lower than the 5-year average of 78%. Meanwhile, 61% companies reported higher than expected revenue, lower than the 5-year and 10-year averages of 69% and 63%.
With the gradual deepening of the financial reporting season, the range of stock market gains has significantly expanded.
The rise of the S&P 500 index this year is mainly driven by the "Magic Seven" stocks, but Energy (XLE) and Healthcare (XLV) rose for four consecutive days last week. Savita Subramanian, a strategist at Bank of America, stated last Friday that compared to growth stocks, profit cycles are crucial for value and cycle stocks.
They expect the second quarter will be the bottom of earnings per share, which is a catalyst for cyclical stocks.
4. Overview of this week's US stock earnings report
Monday
$Domino's Pizza(DPZ)$ , $Logitech International SA(LOGI)$ , $Ryanair Holdings PLC(RYAAY)$
Tuesday
Alphabet Inc , Microsoft , $Cal-Maine(CALM)$ , $General Electric Co(GE)$ , $Raytheon Technologies Corporation(RTX)$ , $General Motors(GM)$ , $PacWest(PACW)$ , $Snap Inc(SNAP)$ , $Spotify Technology S.A.(SPOT)$ , $Texas Instruments(TXN)$ , $Verizon(VZ)$ , $3M(MMM)$
Wednesday
$Meta Platforms, Inc.(META)$ , $AT&T Inc(T)$ , $Automatic Data Processing Inc(ADP)$ , $Boeing(BA)$ , $Chipotle Mexican Grill(CMG)$ , $Boeing(BA)$ , $Coca-Cola(KO)$ , $Hilton(HLT)$ , $eBay(EBAY)$ , $Mattel(MAT)$ , $Union Pacific(UNP)$ .
Thursday
$Crocs(CROX)$ , $Ford(F)$ , $Intel(INTC)$ , $Honeywell(HON)$ , $Valero(VLO)$ , $MasterCard(MA)$ , $McDonald's(MCD)$ , $Roku Inc(ROKU)$ , $Southwest Airlines(LUV)$ , $T-Mobile US(TMUS)$
Friday
$Exxon Mobil(XOM)$ , $Procter & Gamble(PG)$ , $Chevron(CVX)$ , $Charter(CHTR)$ , $Amazon.com(AMZN)$.
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